Educational piece: Importance of the highs, lows and closes
In this chart I graph the Aussie dollar in an alternative way. I've hidden the bars and I'm only showing weekly ranges, daily closes and lines corresponding to key levels, both from the options expirations and from other key fundamental events, like the last rate cut in the Aussie and Brexit.
The key take away is: people think in levels. People don't think in trendlines, people don't think in moving averages, the common denominator is levels. There are moments, where the most people pay attention to an instrument, and those events generate shockwaves, which mark lines in the sand, which continue to affect prices, making them gyrate between the levels generated by them.
You'll see many people say: "The USDJPY will go back to 100" or "S&P500 will go to 1500", "oil will go to 40", "oil will go to 55" but you won't hear them say "EURUSD will go back to the 200 EMA line", outside of technical circles that is. Very rarely people think in those terms. For example, people in Argentina, think about the value of the peso in dollars, it's easy to remember a price, not so much a more complicated construct, let alone a trendline that demands they have graphical depictions of historical prices at hand.
Ok, the idea here is, since the most people pay attention to prices, specially during key events, the levels give us reference points, and important prices like the high, low and close of each day, week, month, quarter and year give important clues to us.
If you look at the line showing the close of each day, you can see how despite price moving higher than levels, many times the close ends up being lower when resistance acts. You can also see the weekly highs and lows, paying attention to the boxes. See how when a level is taken over, price will form a higher LOW on close before moving higher, or viceversa while moving down.
Something as simple as waiting for the daily close, and examining the levels can give us tremendously useful cues for our analysis of price action, this is just one of many elements we use to decipher price action.
The purple dashed lines show the 'waves' in a way, how prices form a definitive lowest high, before turning up, and viceversa when turning down. This is very important, and you can see how the top of each move usually aligns with how the highest low is related to the key levels on chart.
Now, contrary to what some people would say, the 'support and resistance' levels we have here, are not randomly picked, but logically selected based on key fundamental events that drawed massive interest in the instrument at hand. We don't need to be rocket scientists to see this in the price chart, we simply need a keen eye and dedicating time on improving our analytical skills to find useful patterns.
Some of that work, I share with you today.
I hope this is interesting and can open your eyes to how price action and markets operate. It is logical, and not the result of mystical forces, complicated equations or complicated systems that attempt to analyze the whole chart and fit a living, breathing being, into a cold shell. That's simply not how markets work.
You can refer to my other chart, and read the document I attached to it for information on behavioral finance concepts.
My mentor Tim West came up with really powerful tools, and profitable proprietary trading strategies to help us navigate these waters, if you're interested in learning more, contact me for more information.
Cheers,
Ivan Labrie.
The key take away is: people think in levels. People don't think in trendlines, people don't think in moving averages, the common denominator is levels. There are moments, where the most people pay attention to an instrument, and those events generate shockwaves, which mark lines in the sand, which continue to affect prices, making them gyrate between the levels generated by them.
You'll see many people say: "The USDJPY will go back to 100" or "S&P500 will go to 1500", "oil will go to 40", "oil will go to 55" but you won't hear them say "EURUSD will go back to the 200 EMA line", outside of technical circles that is. Very rarely people think in those terms. For example, people in Argentina, think about the value of the peso in dollars, it's easy to remember a price, not so much a more complicated construct, let alone a trendline that demands they have graphical depictions of historical prices at hand.
Ok, the idea here is, since the most people pay attention to prices, specially during key events, the levels give us reference points, and important prices like the high, low and close of each day, week, month, quarter and year give important clues to us.
If you look at the line showing the close of each day, you can see how despite price moving higher than levels, many times the close ends up being lower when resistance acts. You can also see the weekly highs and lows, paying attention to the boxes. See how when a level is taken over, price will form a higher LOW on close before moving higher, or viceversa while moving down.
Something as simple as waiting for the daily close, and examining the levels can give us tremendously useful cues for our analysis of price action, this is just one of many elements we use to decipher price action.
The purple dashed lines show the 'waves' in a way, how prices form a definitive lowest high, before turning up, and viceversa when turning down. This is very important, and you can see how the top of each move usually aligns with how the highest low is related to the key levels on chart.
Now, contrary to what some people would say, the 'support and resistance' levels we have here, are not randomly picked, but logically selected based on key fundamental events that drawed massive interest in the instrument at hand. We don't need to be rocket scientists to see this in the price chart, we simply need a keen eye and dedicating time on improving our analytical skills to find useful patterns.
Some of that work, I share with you today.
I hope this is interesting and can open your eyes to how price action and markets operate. It is logical, and not the result of mystical forces, complicated equations or complicated systems that attempt to analyze the whole chart and fit a living, breathing being, into a cold shell. That's simply not how markets work.
You can refer to my other chart, and read the document I attached to it for information on behavioral finance concepts.
My mentor Tim West came up with really powerful tools, and profitable proprietary trading strategies to help us navigate these waters, if you're interested in learning more, contact me for more information.
Cheers,
Ivan Labrie.
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ivanlabrie.substack.com/
ivanlabrie.substack.com/
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